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Modeling of Electricity Demand for Azerbaijan: Time-Varying Coefficient Cointegration Approach

Jeyhun I. Mikayilov (), Fakhri Hasanov (), Carlo Andrea Bollino () and Ceyhun Mahmudlu ()
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Jeyhun I. Mikayilov: King Abdullah Petroleum Studies and Research Center, PO Box 88550, Riyadh 11672, Saudi Arabia
Ceyhun Mahmudlu: Department of International Relations, Baku Engineering University, Hasan Aliyev 120, Khirdalan AZ0101, Azerbaijan

Energies, 2017, vol. 10, issue 11, 1-12

Abstract: Recent literature has shown that electricity demand elasticities may not be constant over time and this has investigated using time-varying estimation methods. As accurate modeling of electricity demand is very important in Azerbaijan, which is a transitional country facing significant change in its economic outlook, we analyze whether the response of electricity demand to income and price is varying over time in this economy. We employed the Time-Varying Coefficient cointegration approach, a cutting-edge time-varying estimation method. We find evidence that income elasticity demonstrates sizeable variation for the period of investigation ranging from 0.48% to 0.56%. The study has some useful policy implications related to the income and price aspects of the electricity consumption in Azerbaijan.

Keywords: electricity consumption; Time-Varying Coefficient cointegration approach; Azerbaijan (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2017
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